Annual report 2009 - Santander

122Activity and income statementLending declined 6%, pulled down by the fall in commercialcredit in line with the market’s situation. Consumer credit andcredit cards, after several years of expansion, remained virtuallyunchanged and lending to SMEs was also stagnant. Loans toindividuals increased 6% (market share of 24.4%) and mortgagelending grew 5%.Savings declined 3%, with a differing performance by products.Demand deposits increased 24% and mutual funds picked upand increased 43%. Time deposits fell 24%.In the second half of 2009, the Bank took advantage of the lowinterest rates and the favourable risk perception of Chile and ofSantander and issued $500 million of debt in internationalmarkets. These senior bonds were given a rating above that ofChile’s sovereign debt ceiling.Gross income and expenses*% variation in euros 2009 / 2008+2.4GrossincomeExpenses-1.7* Excluding exchange rate impact:Gross income: +4.8%; expenses: +0.6%Net operating incomeMillion eurosEfficiency ratio(with amortisations)%34.6Attributable profitMillion euros33.22008 2009In results (and always in local currency), gross income increased4.8%. Net interest income fell 8.3% year-on-year, hard hit bydeflation, which affected the long position of UF-indexed assetsand liabilities, and by the slower growth in business, especiallyconsumer credit and cards.1,1961,144+4.5%*545563+3.4%*Net fee income increased 4.0%, spurred by foreign trade(+50.0%), insurance (+20.5%) and credit cards (+19.4%).Purchases using Santander credit cards increased 23%, morethan double that of the market. Drivers here were the alliance ofco-branding of cards with LAN, Chile’s main airline, and withMovistar, the largest mobile phone company. Greatertransactions and linking of customers sustained revenue growthin an adverse environment. This growth was partly offset bylower fee income from management of accounts (-19.0%)because of regulatory changes.Lower interest rates produced strong growth in gains onfinancial transactions to EUR 210 million, which partly offset thebig impact of deflation and the slower growth in lending.2008NPL ratio%20092.643.2020082009* Excluding exchange rate impact: +7.0% * Excluding exchange rate impact: +5.9%NPL coverage%10289Operating expenses hardly changed (+0.6%). Net operatingincome grew 7.0%. Loan-loss provisions rose 20.8%, althoughthey were on a downward trend.2008200920082009Attributable profit was 3.4% higher at EUR 563 million (+5.9%in local currency). Retail Banking’s profit dropped 3.4% andaccounted for 63% of the total, while that of Global WholesaleBanking rose 44.6%.The efficiency ratio improved to 33.2%, the recurrence ratio was67.5% and ROE 32.3%. The NPL ratio was 3.20% and coverage89%.Priorities in 2010In 2010, the focus is on consolidating the commercial franchise,continuing customer linkage through all channels, strict controlof costs and investments and strengthening risk management,particularly standardised risks.ArgentinaSantander Río is one of the country’s leading banks, with marketshares of 9.6% in lending and 9.5% in savings. It has 298branches and 2.0 million customers, of which 42% are linked.Santander Río announced the acquisition of a portfolio of30,000 individual customers, 900 companies and 17 branchesfrom BNP Paribas Argentina. When it is authorised, it willincrease the bank’s market share by 25 b.p.The economy grew by around 0.5% in 2009. The outlook for2010 is growth of around 4%. Inflation began to rise as of themiddle of 2009 and reached 7.7% in December, 0.5 p.p. higherthan in 2008. The expectations are for stability in 2010.Argentina began its return to the international markets in thesecond half of 2009, with the announcement of the reopeningof the exchange with the holdouts. The exchange will possiblytake place during the first half of 2010.Annual Report 2009Economic and Financial Review